June 2021 Bulletin
Welcome – constructive dismissal
An employee is constructively dismissed if an employer fundamentally breaches their employment contract, entitling the employee to resign in response and say they were dismissed. The employee must not ‘affirm’ the contract, for example by delaying too long before resigning. Previous case law has shown that a fundamental breach of the implied contractual term of mutual trust and confidence cannot be cured (Buckland v Bournemouth University), but an employer can prevent a situation escalating into a breach of trust and confidence by apologising and correcting the previous behaviour (Assamoi v Spirit Pub Company). In Flatman v Essex County Council, the Employment Appeal Tribunal has reaffirmed the principle that a fundamental breach of contract cannot be repaired.
The employee was a learning support assistant whose duties including lifting a disabled child. Over many months, she repeatedly asked for manual handling training which was not forthcoming. She developed back pain and was signed off work. On her return, the employer told her that she would not have to lift the pupil, she would be assigned to another class and training would be provided. The employee resigned and claimed constructive dismissal. The employment tribunal dismissed her claim. They said that, at the point of resignation, the employer had shown concern for the employee’s health and safety and had not fundamentally breached the implied duty to take reasonable care of her health and safety.
The EAT said the tribunal was wrong. They had looked at the overall position at the point of resignation, rather than whether there had been a fundamental breach of the implied term at some point previously. The EAT said there had been a breach which had become fundamental at the latest by the time the employee resigned because of the increased and continuing risk to health and safety and the actual harm caused in terms of the back pain. The employee had not affirmed the contract. An employer’s intention to provide training may be relevant if action is taken as well but is less relevant in implied terms relating to health and safety than mutual trust and confidence. It was also relevant here that the breach was not a one off but continued over a period of time. The breach had already become fundamental, so couldn’t be cured. The EAT said the employee had been constructively dismissed.
This case hasn’t changed the law, but it has highlighted the importance of applying the legal test correctly. Constructive dismissal cases are complex but what is clear is that employers cannot roll back from a fundamental breach of contract once it has occurred. Unless the employee affirms the contract, the breach can be acted on and resignations can become constructive dismissal claims. In this case, the employer should have sorted the relevant training out at the beginning of the job. That would have prevented the injury, stopped any breach becoming fundamental, and saved the employer the time, cost and hassle of the litigation process.
Wisbey v City of London Police
EU law requires all member states to ensure that individuals suffering discrimination receive appropriate remedies, including compensation. If an employee wins a discrimination claim, section 124(2) Equality Act 2010 (EA) says that an employment tribunal can make a declaration (i.e. that the employee has been the victim of discrimination), order compensation or issue a recommendation to the employer (aimed at reducing the discriminatory effect on the employee). If there has been unintentional indirect discrimination, section 124(4) and (5) EA say that the tribunal must consider a declaration or recommendation first before deciding whether to order compensation. These provisions build on and change the original legal positions under the Sex Discrimination Act 1975 and Race Relations Act 1976, which originally prevented tribunals from awarding compensation for unintentional indirect discrimination.
In Wisbey v City of London Police, the Court of Appeal has looked at whether section 124 provisions are compatible with EU law. The employee was a police officer who had a form of colour blindness. He was an authorised firearms officer. Despite his impairment having no obvious effect on work, in March 2017 he was removed from his firearms officer responsibilities as well as any advanced rapid response driving. In February 2018, after more tests, he was reinstated to these roles. He brought a claim for indirect sex discrimination against his employer. 8% of men suffer colour vision defects but only 0.25% of women. The employee argued that the requirement to pass certain colour vision tests put men at a disadvantage compared to women. In his evidence, the employee’s injury to feelings was linked to his ban from firearms work rather than the driving duties.
The employment tribunal said he had been indirectly discriminated against but only in relation to the removal from advanced driving and not firearms work. The tribunal did not award injury to feelings as it said the discrimination was unintentional – the employer didn’t know men would be disadvantaged in the tests and did not intend the consequences. The EAT did not uphold his appeal so he appealed to the Court of Appeal, saying that sections 124(4) and (5) EA were incompatible with European law. The Court of Appeal dismissed his appeal too. They said the requirement in those sections to consider remedies in a certain order did not make seeking compensation more difficult for an employee in relation to unintentional discrimination. The provisions don’t prioritise one remedy over another and doesn’t dissuade tribunals making awards. In any event, tribunals will usually make a declaration before awarding compensation anyway. In this case, the tribunal might have misdirected itself when it said no compensation was due because the discrimination had been unintentional. However that did not make the decision not to award compensation wrong in this case on the facts. It was the driving ban which was found to be indirectly discriminatory, and the employee’s evidence was that his feelings were injured by the firearms work ban, not the driving. On that basis, injury to feelings was not appropriate.
This case doesn’t really explain why the Equality Act 2010 retained some different remedy provisions for unintentional indirect discrimination when the bans on compensation were removed by the time the Equality Act was introduced. It makes little difference in practice as a tribunal is highly unlikely to award compensation in a discrimination claim without first making a declaration. This case also shows that injury to feelings are based on the employee’s evidence about the impact the discrimination has had on them. In this case, the employee’s evidence showed that his feelings were not hurt by the discriminatory ban on advanced driving duties, and therefore it was right that no compensation was awarded.
Changing terms and conditions – Covid-19
Khatun v Winn Solicitors
Many employers have changed terms and conditions during the pandemic, whether to access the furlough scheme or to enable the survival of the business through economically unprecedented times. Some employees have been willing to agree to those changes, keen to avoid a redundancy situation. If an employee refuses to change their contractual terms, an employer cannot unilaterally make the change without breaching the contract. The safer method is to dismiss the employee lawfully from the old contract – by giving contractual notice – and offer to immediately reengage them on new terms. Provided the employer has a sound business reason for making the change, the dismissal may be fair based on ‘some other substantial reason’ (SOSR), one of the five potentially fair reasons to dismiss. The dismissal must be reasonable overall, which includes following a fair procedure.
In Khatun v Winn Solicitors, the employer experienced a downturn in work due to the pandemic. It decided to furlough half its staff, with the other half retained to service the remaining work. All employees were required to sign new contracts or face dismissal. The new terms gave the firm the right to furlough staff or to unilaterally reduce their hours and pay on short notice. The employee refused to sign the new contract, saying she would consider furlough or a reduction in hours in future if the situation arose. The employee was urged to reconsider but she refused. She was dismissed without notice or accrued holiday pay because the COO was ‘fuming’. Her remote computer access was removed before she was even told about her dismissal. The employer later accepted they owed her notice and holiday pay and paid it. The employee brought an unfair dismissal claim.
The employment tribunal agreed that she had been unfairly dismissed. They acknowledged that the business had sound, good business reasons for the contract change. Given the effect of the pandemic, it was reasonable to request these changes and it was not premature. Theoretically, the dismissal had met the SOSR test. However, the employer had not behaved reasonably overall. The tribunal conceded that only one employee out of 300 had refused to sign, which indicated that the business had acted reasonably. However, there had been no meaningful consultation at all, just a one-sided conversation. Although a subsequent phone call had looked more like consultation, the tribunal did not believe meaningful consultation had taken place. The employer did not explore alternatives and instead just reiterated the firm’s position. The firm said they did not have time to negotiate with 300 staff, but the facts showed that it was only this employee with whom consultation was required. The tribunal was surprised that a firm of solicitors had so little regard for a binding contract and an employee’s desire to protect her contractual terms. The employer’s own evidence was that they did not explore alternative options and the employee would be dismissed if she refused. They had offered no appeals process. The tribunal said a reasonable employer would have taken more time to engage meaningfully with the employee and explore alternatives to dismissal. The dismissal was unfair.
Fire and rehire is itself coming under fire (see below) but this case also shows the importance of following a fair procedure in any dismissal case, whatever the circumstances. The key issues in this case were the lack of consultation and any reasonable consideration of alternatives to dismissal (including her offer to stay on existing terms and consider changes in future if required). With a sound business reason for the change, and SOSR engaged, all the employer then needed to do was follow a fair process. For one employee, this would not have taken much longer than the 48 hours in which the employee was given to sign her new contract. The employer here let their panic at Covid, and ‘fury’ with the employee, override the importance of a fair process. A remedy hearing will decide just how much that mistake will cost.
All Answers v W and R
In order to qualify as a disability under the Equality Act 2010, an impairment must have a substantial and long-term adverse effect on an employee’s ability to do day to day activities. The long-term requirement is met if the impairment has lasted, or is likely to last, at least 12 months. A recent case in the Court of Appeal has looked at when that assessment should take place, at the time of the discrimination or with the benefit of hindsight when preparing for a tribunal hearing.
In All Answers v W and R, the employees said their depression and post traumatic stress disorder met the legal test for disability. They said they had been discriminated against on 21 and 22 August 2018. The employer challenged their disability status, saying that in August 2018 the impairments had not lasted, and were not likely to last, at least 12 months. The employment tribunal considered evidence about the effect of the disability after August 2018. Their conclusions about disability were described in the present tense, apparently at the date of the tribunal hearing, rather than assessing what the position had been in August 2018. The employer appealed to the EAT and lost, then appealed to the Court of Appeal. The issue to be decided was whether the impairments met the long-term test.
The Court of Appeal looked at what ‘long-term’ meant. The impairments arose in April 2018, so had not lasted for 12 months by August 2018. The question then was whether the substantial adverse effects of those impairments were ‘likely to last for 12 months’ at the time of the alleged discrimination. That question must be answered using the facts and circumstances which existed at that time, not with the benefit of hindsight or evidence from after that date. The Court concluded that the tribunal had not asked that question. They said the employees ‘are disabled’, not ‘were disabled’ at the relevant time. The use of the present tense, asking ‘is [the employee] disabled?’ clearly showed this error. The employer’s appeal succeeded, and the case was sent back to the employment tribunal to decide the issue properly.
This case demonstrates the complexity of the law on disability, with the Court of Appeal saying even learned judges in the EAT had got it wrong. Employers should always tread carefully with employees who say they are disabled. Early legal advice is essential to ensure cases are defended robustly and in accordance with the complex legal test.
Somerville v Nursing and Midwifery Council
Most of the cases on worker status so far have dealt with relatively low paid gig economy workers, such as cab drivers and couriers. In Somerville v Nursing and Midwifery Council, the EAT has looked at the worker status test in relation to a barrister who had a contract with the Nursing and Midwifery Council as a panel member in professional conduct hearings. A ‘worker’ is defined by section 230(3) Employment Rights Act 1996. The definition includes employees and anyone else who works under ‘any other contract…whereby the individual undertakes to do…personally any work…for another party’ provided the other party isn’t a client or customer of the individual (which would make them genuinely self-employed).
Mr Somerville was contracted to sit on panels in fitness to practice hearings, which he did alongside his other legal work as a barrister. His contract with the NMC said he was a self-employed contractor and gave no requirement for him to be offered any work. Nor was there any requirement on him to accept work when it was offered. He brought an employment tribunal claim for holiday pay, saying he was either an employee or a worker. The employment tribunal said there wasn’t sufficient mutuality of obligation to be an employee – he wasn’t required to do a certain number of days and was free to withdraw from dates he accepted. However, he had to do the work personally. The work was central to the NMC’s main function of maintaining high standards for nurses and midwives. He had to do mandatory training. His pay was fixed and non-negotiable. As such, the tribunal said there was a degree of subordination to which someone truly self employed would be unlikely to agree. He was a worker. The NMC appealed. They said that an ‘irreducible minimum of obligation’ – to offer and accept work – was an essential part of worker status.
The EAT did not agree. The tribunal had established that there was an individual contract every time Mr Somerville sat on a panel. There was also an overarching contract for providing his services. Once that overarching contract was established, there was no additional duty to demonstrate any more mutuality of obligation. The important question for worker status wasn’t the requirement to offer and accept work but the degree of control exercised once that work was accepted. The EAT said Mr Somerville was under a high degree of control in his work as panel chair. Once he said he was available, he was required to accept the work offered, perform it personally (he could not subcontract it out to another person) and work to the particular standards and requirements of the NMC. The EAT said the fact he paid his own tax was not relevant.
This is yet another case that demonstrates that the labels which businesses put on contracts can sometimes mask the true nature of the legal relationship. Employment tribunals will dig behind those labels and look to the reality of the position. If an individual is integrated into the business in the way Mr Somerville was, worker status is likely. This also shows that worker status cases are not limited to the gig economy. Self-employed status should be used with extreme caution by employers and only when it truly represents the relationship between the parties. Employers should beware that individuals on zero hours contracts, where the facts imply an overarching contract, may well be workers.
Health and safety dismissal
Sinclair v Trackwork
Section 100(1)(a) Employment Rights Act 1996 says that an employee is unfairly dismissed if they were dismissed for carrying out activities assigned by the employer which are designed to reduce or prevent health and safety risks. A dismissal under this section will be automatically unfair and employees do not need the usual two years’ continuous service to bring these claims.
In Sinclair v Trackwork, the employee was a Track Maintenance Supervisor who was asked to implement a new safety procedure. His colleagues did not know he had been given this task and complained about his approach which they said was ‘over cautious and somewhat zealous’. This created ill feeling and friction among his colleagues, for which the employee was later dismissed. He brought a claim for automatic unfair dismissal. The employment tribunal said he had not been unfairly dismissed. He was dismissed because of the way he had carried out his health and safety activities and demoralised the workforce, not because of the health and safety activities themselves.
The EAT disagreed. Carrying out health and safety activities will often be met with resistance from colleagues. That is why the protection of section 100(1)(a) exists. It would undermine the purpose of the law if any upset or ill feeling caused by legitimate health and safety activity could be hived off and treated separately from the activities themselves. The EAT said there may be cases where an individual’s conduct can be separated from the activities – if that conduct is unreasonable, malicious or irrelevant to the task – but that was not the case here. The employee had simply done as instructed and relationships with colleagues had soured as a direct result of those activities. The EAT said he had been automatically unfairly dismissed and sent the case back to the tribunal to decide on remedy.
This case is important during a pandemic, where health and safety activities will often be delegated to members of staff and may be met with some resistance, especially as society opens up. Unless an employee is behaving in a malicious or unreasonable way in relation to those duties, they will be protected from any dismissal relating to the way they have carried out those duties. The messaging in your business in important here. It is important to demonstrate from the top that health and safety duties are both vital and respected. That will guard against a culture of resistance to activities which are designed to keep everyone safe.
Estimating the cost of workplace conflict
ACAS has produced a new report called ‘Estimating the cost of workplace conflict’. It presents a snapshot of how conflict can affect businesses and the potential costs that may be involved. The report says that in 2018 to 2019, 9.7 million UK employees experienced conflict at work. Only 5% of those resigned, leaving a lot of unhappy people at work. Of those who remained at work, 40% said they felt less motivated as a result. The recruitment and training of new staff to replace those who have left due to conflict costs businesses around £14.9 billion per year. Conflict related sickness absence cost £2.2 billion.
The report estimates that the cost of management time in dealing with a formal grievance is £951, the average cost of a disciplinary process is £1141. The cost of management time in dealing with tribunal complaints is about £282 million a year, with £264 million spent on legal fees. The report estimates that the overall cost of conflict to employers in the UK each year is £28.5 billion. That figure shows that conflict can be eye wateringly expensive. At a time where businesses are already struggling, this report offers ideas about how to reduce conflict and its associated costs.
The report gives three strong messages:
- Good management – managers must be ‘conflict competent’.
- Timing – line managers should spot and intervene in conflict situations well before formal processes have started.
- Creativity – there is a natural opportunity for improvement and change where the status quo is challenged, which is a common cause of conflict at work.
Businesses should focus on effective and early resolution of workplace disputes to nip potential problems in the bud, especially when dealing with poor performance and sickness absence. The report suggests disciplinary matters should focus on learning rather than blame. The ultimate aim – for many reasons, not just cost – is to move towards resolving disputes in the workplace rather than in the employment tribunal.
Find the report at https://www.acas.org.uk/estimating-the-costs-of-workplace-conflict-report
Should employers be allowed to fire and rehire? In economically hard times, or when a business is restructuring, the ability to change employment terms can be an essential tool. The law does not allow an employer to change employment terms unilaterally, so giving lawful notice and offering a new contract in return is a safer option. It does create a dismissal though, which may be unfair. Unfair dismissals are often defended on the basis of SOSR – some other substantial reason – but the business need only have a ‘sound business reason’ for the contract change, as well as behaving reasonably overall. Is banning a perfectly legitimate process – lawfully ending one contract and offering another – really the answer?
Fire and rehire has been brought into the spotlight recently by the widely reported British Gas case, where employees were given notice to end their existing contracts and asked to agree new terms for lower pay and longer hours. Hundreds refused and so their employment terminated. An Observer poll found that 9/13 companies firing and rehiring this year maintained healthy profit margins. That headline might be misleading, it seems to disregard the fiscal responsibilities businesses have to shareholders and underplays the impact of declining profits. British Gas’s profits have halved over ten years and this year reported its weakest earnings on record. Shouldn’t they be allowed to address that downward trend?
The government asked Acas to investigate fire and rehire and received the report in February this year, but its content has not been published. MPs have debated the issue recently too. Government representatives indicated that they need to tread carefully when considering government intervention in commercial contractual matters between employers and employees. Whilst denouncing ‘bully-boy tactics’, representatives said the government needed to look at the Acas evidence on the flexibility that fire and rehire tactics offer, where the ultimate aim is to save jobs. The government has said they will look at the issue, and the Employment Bill more generally, ‘when parliamentary time allows’, so the can has been kicked down the road for now.
Fire and rehire should always be a last resort. The pandemic has shown that employees faced with the threat of redundancy are often willing to accept new, less favourable terms, in order to protect their long-term employment. Communication is the key here, as is considering what cost-free sweeteners can be offered alongside pay or benefit cuts. The last year has shown us that benefits such as flexible and home working are considered priceless by some employees. Fire and rehire shouldn’t be banned, but it should be used sparingly, when all other methods have been exhausted and there really is no other option.